What are the oil prospects: forecast of cost and demand
Citi, the largest U.S. bank, made a forecast for the oil market. According to the information, the cost of raw materials will grow and by the end of this year it will reach 60 dollars per barrel. The U.S. bank experts are convinced that increased demand is the main driver for market development. Another important task is the reduction of reserves, the problem of which is extremely acute. On the whole, oil prospects are assessed as positive.
The main scenario from Citi Bank assumes that the market will retain the momentum of value growth. The balance of supply and demand should be restored, which would contribute to the reduction of raw material reserves in storage facilities.
By the end of this year, the price of Brent oil will rise to $60 per barrel, and WTI will reach $58 per barrel.
Citi analysts predict good prospects for the oil market, but there are also risks. For example, the last few weeks have seen a slowdown in the rate of decline in reserves. At the same time, the participating countries are reviewing the current OPEC+ agreements to increase production. These changes have had a negative impact on the segment, and the Brent price has fallen by 12%. However, experts hope that such dynamics will not be systematic, and soon everything will return to the decline in reserves and the rise in prices of raw materials. The pace of the global economy is growing, which means that demand for energy will increase, soon the level of oil consumption will reach the values observed in 2019 – then the demand per day was 101 million barrels.
At present, the cost of oil is in the range of $40 per barrel, and Citi believes that the quotes of raw materials will go up steadily. In the second quarter of this year the oil price will be $55 per barrel.
The key factor affecting the market is the growing demand and increased production of oil products. In addition, as some segments recover, gasoline consumption is increasing. However, it is too early to talk about the recovery of the aviation industry, and therefore fuel is not yet as much in demand as before the pandemic. The demand for jet fuel will return to pre-crisis levels not earlier than 2024-2025.
It should be noted that the forecast from Citi Bank is more optimistic than from its colleagues from other companies and agencies. A number of experts are confident that the oil price in 2021 will remain at the same level as at the end of 2020, and if there is any growth, it will not be as significant as we would like it to be. Demand, in turn, will slow down political events and global sentiment in the market.
